Barneys is facing an uncertain future, and it reveals that the era of aspirational, high-end department stores is over
- As Barneys awaits its fate, experts say its missteps are reflective of larger challenges for luxury department stores, which have failed to keep up with the modern consumer.
- Experts told Business Insider that the biggest issue for Barneys is that it lost its competitive edge and its value proposition as e-commerce took over, and that the department store was no longer an exclusive place for designer products.
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As the future of bankrupt Barneys continues to hang in the balance, the uncertainty tells a larger story about the downfall of luxury department stores.
Though Barneys has a tentative buyer - Authentic Brands Group is currently the lead bidder in a possible $271 million deal - the plan as it stands would call for the closure of its seven remaining brick-and-mortar stores. Potential efforts to preserve the Barneys brand would mean absorbing it into Saks Fifth Avenue stores, meaning the iconic New York department store that served as the backdrop for countless scenes in shows like "Sex and the City" and "Gossip Girl" would be no more.
In a recent column, New York Times fashion critic Vanessa Friedman wrote that what once set Barneys apart has ultimately become its downfall - its elitism and pandering to a "certain, almost fictional New York ethos."
"[Barneys was] unabashedly elitist, proudly exclusionary - you got it or you didn't, and if you didn't, that was your problem, not theirs - and imbued with an arrogance that, at a certain point, began to chafe," Friedman wrote.
Barneys found new ownership in 2010, and it tried to pivot to become more malleable to rapidly changing customer sentiments and better focused on service. However, Friedman wrote that this new "somewhat generic elegance" had ultimately "caused many to start mourning its former, our-way-or-the-highway incarnation."
Barneys became a 'luxury generalist'
Further, Barneys' struggles have placed it among the ranks of fellow high-end retailers like Lord & Taylor and Henri Bendel, once iconic stores that fell prey to the growth of e-commerce, sky-rocketing rent, and shifting consumer habits. While these companies aren't unique in confronting challenges that department stores are facing across the board, part of the issue for Barneys was it became a luxury "generalist," according to Rich Smith, chief marketing officer at the marketing firm Chief Outsiders.
"[Barneys' bankruptcy] bursts the theory that the high-end segment of retail would be immune to the trends of e-commerce," Smith wrote in a statement shortly after the bankruptcy announcement. "As the theory went, high-end retailers like Barneys would continue to be a destination where people would come to experience the merchandise and would survive in populous, affluent markets. Where the theory breaks down is that Barney's is a high-end generalist, selling products from many different designer labels under one roof."
Joe Yakeul, CEO of digital marketing agency Agency Within, echoed Smith and told Business Insider that the biggest challenge for Barneys is that e-commerce eliminated the ability for the brand to set itself apart with brand selection and curation. Gone are the days when Barneys and fellow luxury stores were the go-to venues to find specific, high-end products. Today, the modern consumer can find just about anything with a quick Google search.
"Barneys was unable to come up with a unique purpose or value prop for the consumer," Yakeul told Business Insider. "Once you remove selection and value as differentiation, having a retail presence can quickly turn into a liability rather than an advantage. This is not unique to luxury, but indicative of wholesale brick and mortar overall."
The future of Barneys
In its heyday, luxury department stores were prime destinations to find exclusive products that customers were incapable of finding elsewhere. However, today many brands have their own boutiques or showrooms, which is taking away from foot traffic and sales, according to Smith.
"In today's e-commerce world it is easy to buy products from multiple brands online in no time at all," Smith wrote. "Combine this fact with the lack of rich brand experience that fans are really looking for and the high-end, multi-brand destination store becomes obsolete."
However, Jonathan Treiber, CEO of offer-management platform RevTrax, said he's optimistic that luxury department stores will be able to maintain their edge.
"Luxury department stores still provide the high-touch, in-person shopping experience that many luxury customers still demand," Treiber told Business Insider. "The products are generally less commoditized and available online, and customers typically want to experience the products before making large purchases. While convenience matters to luxury customers, most still demand white-glove service and a less transactional experience."